A robust and efficient emissions trading system is key for decarbonising the European economy

The European Commission is planning to revise most of the EU climate and energy legislation in 2021. The “Fit for 55” legislative proposals are expected in the summer, and public consultations have just been finalised. Most relevant regulations for Fortum are the emissions trading directive, renewable energy directive, energy efficiency directive and the energy taxation directive. Fortum has provided responses to all consultations.

Fortum’s key messages on the revision of the EU climate regulation

• Fortum firmly supports increasing the EU 2030 climate target to at least 55%. The new target must be allocated between ETS and non-ETS sectors based on cost efficiency. Synergy of the climate target with renewable and energy-efficiency targets must be ensured.
• The EU emissions trading system (ETS) must remain as the main instrument of the EU climate policy. The system must be further reinforced and extended in order to be able to deliver on the increased climate ambition.
• The ETS should be reinforced by revising the linear reduction factor (LRF) in line with the revised 2030 target by 2023 or 2024 at the latest. The market stability reserve (MSR) should be revised by continuing the 24% intake rate after 2023 and adjusting the activation thresholds (400 and 833 Mt).
• The ETS should be extended by establishing a stand-alone transitional trading system for the new sectors in order to safeguard the operation of the existing ETS. Potential sectors for the extension include maritime, heating of buildings and, in the longer run, waste incineration.
• Double coverage of sectors has to be avoided. Each sector should be included only under one climate policy pillar (ETS, ESR, LULUCF). The coverage of the effort sharing sector (ESR) should be gradually reduced and related activities moved to the ETS and LULUCF (land use, land use change and forestation).
• The flexibilities between ETS, ESR, LULUCF should not be increased; the aim should be that each climate policy pillar delivers credible reductions on a stand-alone basis.
• Separate targets for greenhouse gas emission reductions and carbon removals, including all forms of natural and technical solutions, are needed. A legislative EU framework for technological solutions for carbon removal and negative emission technologies should be incorporated into the Fit for 55 package.